August 10, 2009

The House of Morgan

I was lucky to have stumbled into this book a couple of months back. The conversation revolved around the new book for "The House of Dimon" and my colleague discussed that the "House of Morgan" is an interesting book that he has heard of. Luckily one of the older and small bookstore near our office had this book. It took me somtime to read this 720 page book that discusses the house of Morgan till 1990. It broadly has been divided into three sections according to time: Baronial, Diplomatic and Casino Age.

Baronial Age:

The life of J P Morgan has always remained a mystery, probably because of very little official records that are online that can be read by all. This book unravels his life remarkably. The origin of the bank, the authority of Junius Morgan (J P Morgan's father) and himself and later, his son has been dwellved in the right depth and detail. The author finally sums up his role in the world of banking very well. His contribution of saving US during the Gold crisis (similar to what happened to India in 1992), his saving of the stock exchange collapse and New York in 1907, and the enormous trusts (Shipping and steel trusts) he created helped him to pretty much rule the world and lend a voice that no country/President could afford not to hear. Here are some interesting titbits / thoughts:
  • It was interesting that "Titanic" had a very remote role in his life

  • His life was similar to Ellsworth Toohey. Enormous power and voice that could help him rule the world beyond ones imagination

  • The introduction of the Federal Reserve Act, though power did not decisively shift from bankers to government; it was nevertheless a move in the right direction

Comparison with "The Partnership", the author has divided the book well making it easier for the reader to know what to expect at every stage. Somehow, I keep coming back to "The Partnership" as I found to be the most absurd way of writing a book splitting the book into sections that are product and people focused forcing readers to get lost in many sections of the book.

I am sure that one should read the book 1907 to get a bit more perspective on what happened exactly during this period.

Diplomatic Age:
The next section is a bit long and the foundation of the story has been slow but yet essential considering that what one has read in the previous section. On the face of it, the first few pages shows nothing great in character of the son. Yet the power to let the decentralize decision making comes through quite well. Having finished the diplomatic age, I probably no longer have the same degree of interest that I carried when I had finished the first part. The book has kept pace but could have been better. As the period symbolizes “Diplomacy”, it can be excruciatingly slow in certain sections which could have been either avoided or probably done in a much more concise manner. This is a period where the role of the bank witnesses a metamorphosis with the gradual decline in the bank’s foothold in the world of finace with events such as New Deal and the Glass-Steagall and the gradual growth in public finance (spending led by government).

What I did like in this book was the additional and probably, the perspective it brought forward which was clearly missing in the other books that I read in this age. When you read books like “Once in Golconda”, “The Great Crash of 1929” and briefly of “The Partnership” it discusses the events unfolding prior to the crisis and the aftermath. However, the view for the reader is restricted to only the common man effect. One really does not get any sense what was happening on the political side which was critical to the crisis. This book, given the role the bank played in government finance across the world beautifully articulates the same.

Most books written on this era maintain one thing. Politics and banking did not go well. Whether its was the impact of Glass Steagall that led to the creation of First Boston (offshoot of Chase National Bank and First Bank of Boston), Morgan Stanley, and Smith Barney or the impact of war there was frequent clash of interest between the two parties.

Casino Age

Honestly, this is the last, longest and probably most extensively covered with little, if any, to takeaway. If anything, this section probably attempts to downplay the steady decline in market share of the bank. Further, this would be my close to fourth book to read on the wonderful 80's after "Predators Ball", "Barbarians at the Gate" and "Den of Thieves" and some through "The Partnership". Fatigue was clearly evident as I was quite desperate to finish this section.

Having completed this section, I was lost on the role of the bank played in this era as the concentration shifted from the bank to Morgan Stanley. There are a few chapters on the bank becoming global (Arab countries and Asia) but this section lacked the pace that kept the book alive in the earlier sections. At sometime, the author could have shortened this section. Industry specific discussion were fewer on the banking side but was somewhat sketchy for the capital market business.

The sad ending of Morgan Grenfell probably moved me a little. Not that their contribution was be deeply missed by the industry but losing history in a very uneventful manner was unfortunate.

Anyways, my closing comments to this book would be simple. I may have sounded a bit negative towards the end of the book. Honestly, given the first two sections I raised my expectations for Ron Chernow, the author beyond reason. My sincere appreciation to the author for the depth of his research and his ability to publish a wonderful history of the company. I think sometime in the future the author should write the next section of the bank living through the 90's, through the fall of Glass-Steagall Act and the bank's ascent to supremacy in 2009, post the world wide economic crisis.

Read it.

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